From Micros to Millions: 2% per day

[NoahA]

I am guessing you are not referring to Pacific Daylight Time. LOL. What is PDT?

He is talking about the Pattern Day trading Rule. If you were to be trading stocks, you would need at least 25k in your account in order to make more than 3 trades in a week (or something like this). If you dip below 25k, your account is frozen. So the idea is that traders with small accounts don't go the day trading route and focus more on investing. Its a rule that is placed on brokers who have to monitor their clients.

But of course, with futures, there is no such rule. The point he is making is that with such a small account, you have no hope in hell. But don't mind him. @comagnum is a really great guy, and I enjoy his posts, but he simply does not want to accept that when trading futures, the metrics are much different. You cannot think in terms of percentages of your account. If you can pull off 5 ES points per day, this would be $250, and it doesn't matter if you have 10k in your account or 100k if you're only trading 1 contract. (the % gain would of course be different) But, if you're a seasoned veteran and can trade 10 contracts at a time, then you just need to calculate how much margin you need for this.

What you're doing is essentially the opposite of how most people think. As long as you don't let the mental game get to you, then trading to make 20 ticks per day is the same if trading 1 MES, or 1 ES, or 10 ES. Its simply your account size that dictates the size you can trade along with the expectancy of your trading plan and past performance.

 

[sstheo]

He is talking about the Pattern Day trading Rule. If you were to be trading stocks, you would need at least 25k in your account in order to make more than 3 trades in a week (or something like this). If you dip below 25k, your account is frozen. So the idea is that traders with small accounts don't go the day trading route and focus more on investing. Its a rule that is placed on brokers who have to monitor their clients.

But of course, with futures, there is no such rule. The point he is making is that with such a small account, you have no hope in hell. But don't mind him. @comagnum is a really great guy, and I enjoy his posts, but he simply does not want to accept that when trading futures, the metrics are much different. You cannot think in terms of percentages of your account. If you can pull off 5 ES points per day, this would be $250, and it doesn't matter if you have 10k in your account or 100k if you're only trading 1 contract. (the % gain would of course be different) But, if you're a seasoned veteran and can trade 10 contracts at a time, then you just need to calculate how much margin you need for this.

What you're doing is essentially the opposite of how most people think. As long as you don't let the mental game get to you, then trading to make 20 ticks per day is the same if trading 1 MES, or 1 ES, or 10 ES. Its simply your account size that dictates the size you can trade along with the expectancy of your trading plan and past performance.

Thanks for the great explanation. Indeed, "the mental game" is the entire focus of this journal. After today, with about $90 net profit, my current S&P points/day average is 28. If I can keep this number above 20 full points per day and slowly grow the contract size as planned, then things will get really exciting around here.

But I know a trader who is doing even better at 3% to 5% per day, but he says he has reached his max size. He has tried to add more contracts, but he can't. I hope I can push through that barrier.

 

[scalpi]

Before the micros there were only E-minis. Need I say more?

Okay. I will. This is an semi-abbreviated version of my whole story of the last 14 years:

IB

Between 2005 and 2007, some freaking idiot who looks a lot like me took my $100k Interactive Brokers trading account and made lots of stock, ETF, option, FX, and futures trades. He had some newsletters with trade recommendations. Unfortunately, he took the account the wrong way and made it smaller and smaller and smaller and smaller until it was all the way down at $20k. After this 80% loss, he figured it was time to stop the madness. But after holding around there for about a year, while he researched what had gone wrong, eventually he took it all the way to obliteration.

Yes, at that point, I was pretty dejected. But I didn't give up. I was persistent in trying to figure out what I needed to change. I knew if I studied enough and practiced enough, that I could become a profitable trader. So, I bought courses and went to town.

FX

And then I decided to go small. What was small? Foreign Exchange. I could open an account with just $100! A perfect practice field for sure. With 200:1 leverage I could trade one tiny position and not blow up!!!

I learned FX and figured out some great things about how to trade and became a fairly consistent. After lots of initial small failures, I turned $500 into $4000 in just a few weeks.

ZuluTrade

I was then so confident that I signed up with ZuluTrade as a SIGNAL PROVIDER. After several bad starts, I did well and quickly rose into their "Top 100" tier (of about 10,000 signals). I eventually got to #50 and had over 100 subscribers with over $1,000,000 in subscriber funds that were following my signals.

But before I launched that system, I carefully studied all the other winning systems on ZuluTrade and discovered that almost all of them SUCKED BIG TIME!

The Risk:Reward parameters were way out of the realm of reality. Some were taking 200 pip risks to make 10 pips! The very same guys had posted that they guaranteed a 50 or 100 pip stop, and then promptly ignored it when in a draw-down.

And many of them said something like "10 concurrent open positions max" but then went on to open 15, 20, or even 30 trades at the same time! Without question, "Martingale" was the #1 favorite alcoholic beverage of all those ZuluTrader providers!

It should come as no surprise then that most of those signal providers eventually BLEW UP.

So I made a decision that I would establish a reasonable stop and stick with it - no matter what, knowing I could always get back in later. And that is how I got into the top 100.

Subscribers saw that I was winning, yes, but perhaps more importantly, unlike most signal providers, I was actually trading the way I said I would. I didn't over-leverage and honored my stops. Imagine that! More than win, those subscribers didn't want to lose.

Well....

I don't remember the economic or political situation, but the FX market was moving rapidly in one direction. And even though I honored my stop and my position sizing, I started to fight the move. And I kept fighting the move. Even though I didn't blow my account, I lost the confidence of 90% of my subscribers.

So I learned a bit too late- don't fight the move! and that staying FLAT in dangerous markets is just as important as honoring stops. Yes, my exit was honored, but there weren't enough winners over those few days to compensate. (Actually going with the trend would have been a great idea, but that is a different post...)

Sometime later, the Dodd-Frank act killed FX in the USA, and I had to stop trading FX. I went through probably 8 international brokers. One by one they said," we don't work with U.S. clients."

Futures

So I finally left FX and opened an account with Global Futures (are they even around any more?) and later AMP. I started trading futures. But I was way over-leveraged with even one E-mini in a small account. $2,000 became $1,000 and then $500 and done. Make more money.... Then $2,000 > $1000 > $500 again. Over and over and over.

I joined signal services and chat rooms. Just enough progress to keep me coming back, but ultimately, I failed again.

Funded Accounts

Then I tried TopStep. Then OneUp. Then LeeLoo. I spend over $9k on combines over 4 years. I ended up earning 4 funded accounts from OneUp and two from LeeLoo. But I blew them up each time. THIS BEING SAID, I noticed that I traded better each time, and better because I was being watched.

Micros

Enter the Micros! As mentioned, the micros saved me. I could finally trade small again like with FX. The account blowing-power of the micros is still present, but at 1/10 the destructive force.

ET Journal Power

I have finally figured out that while good entries and exits are paramount, consistency is really the foundation, because "full tilt" still could rear its ugly head again at any time.

One of the reasons I am on EliteTrader is because having "somebody" watch me is very helpful to me. And my very best combine was the one with the smallest max drawdown. Some traders have discipline like a steel trap. I don't. So I am trying to compensate by doing this journal. This journal forces me each day to refocus and keep my rules.

Yes, with $7k, I could load up with 7 or more full ES contracts and make a killing. I could easily double my account in one day. Of course I won't do this and risk losing it all, but I could see myself breaking my rules and trying 1 or 2 ES contracts in order to get 10% to 20% in a day.

Or maybe I would start to overnight swing trade with the MES (micro ES), only to find my account down $200 instead of up $100 as I planned, because I just "knew" which way the market was going to go overnight!

Or maybe I would just trade one or two micros, but not set my stop because of my confidence in the direction of the market.

But no. All of these stupid behaviors are now (mostly) a thing of the past.

No More Blowouts

Will I blow out this account? Maybe. But I think I am in a position more than ever before to take all the hundreds of "Lessons Learned" and carefully, methodically, consistently, and "slowly," grow this seed of an account into something awesome.

sstheo

sstheo, thank you for that journey of your trading live !

I think a lot of people can learn a lot of that ! It is mostly a long way to bee sucessfull !
One thing most people do not see, that everyone has to find his own trading style

There is no good or bad to trade as a scalper or as a daytrader or investor. It has to fit that what you want. That what you like.Otherwise you will have no success !

As written above I am also a scalper. I tried to teach some friends my style. Today I think you can NOT LEARN SCALPING. You have to find your own way, with your own experience.

But certainly you can shorten the way, when you listen to other successfull traders mostly out of psychological problems they solved !
Everyone Good Luck in Trading !

 

[sstheo]

Yesterday I took 35 trades, and you saw the charts with about half of them - hot off the press.

With 98 dollars NET profit after fees, I got about 50% of the goal for the day, but the price action seemed weird yesterday, and I don't have any regrets. "When in doubt, stay out."

On a per-trade basis, the profit was perfectly in line with my current average of 2.2 MES ticks and average net trade profit of $2.80.

 

[easymon1]

I took 35 trades, and you saw the charts with about half of them - hot off the press.

...sst, chart pics you say?
A Spreadsheet Timetable Scatterplot Graph might be informative: x-axis sessiontime(9to4), y-axis eachtradeP/L

 

[.sigma]

The speculation tax was a much higher taxation than the louzy 0.35% (could go 100 times higher than the tax you speak about) .
If you sold stocks within 6 months you had to pay 33% taxes on the profit. And losing trades were not deductable, which could raise your effective taxation over 50% (depending on your winning rate).

Insanity... death and taxes

 

[Evgeniy]

Ninjatraderbrokerage provides free services for limiting the type and number of traded contracts, blocking the account when the daily loss limit is reached. Perhaps there is something similar in AMP.

 

[syswizard]

But I know a trader who is doing even better at 3% to 5% per day, but he says he has reached his max size. He has tried to add more contracts, but he can't.

Why not ? Is this a mental barrier ?

 

[yc47ib]

Yeah. It's almost surprising that you're making as much money as you do considering your trading style and the commissions on the micros.

You actually paid 38.7% of gross profit in fees yesterday.

Have you considered just going directly to 1 ES and staying with 1 ES until you're at say 20K?

Give yourself 1K of 'risk capital' and go back to the micros if that goes bust. If you're as consistent as you seem to be - it should/could work out fine. Pretend your account is 11K.

OP cannot switch to ES with his account size, as he stated, he is trading two different products to hedge each other, I think that is his main way of avoiding taking big losses when market jerks around to kill the new comers with less than 10 years of experience in this field.

 

[sstheo]

Why not ? Is this a mental barrier ?

Yep. Mental only. It's all about psychology. It was an important discussion I had with him.

Maybe there is a word for a "Dark Side Epiphany" LOL? Maybe "Bombshell"? "Missile to the brain?" or "Thunderbolt?"

I recognized that there may be a big evil boogeyman out there I hadn't counted on, who is waiting to derail my progress...

My friend is making over 3% per day and has for 20 years. Who am I to argue with him, and who am I to think I will be any different?

Of course I am an eternal optimist, as all of us traders are, and I hope I can be different and just push through each successive threshold unencumbered.